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The stock market has been battered by a tough macroeconomic environment through the first four months of the year. The S&P 500 — a benchmark for the U.S. economy — has fallen about 13.3% from its high, putting the index in correction territory. However, some of Wall Street’s professional investors still see upside, especially in beaten-down growth stocks.

For instance, J. analyst Parker Lane of Stifel Financial has a price target of $150 on Unity Software (NYSE: U), implying a 126% upside. Similarly, analyst John Egbert of Stifel has a price target of $36 on Redfin (NASDAQ: RDFN), implying a 223% upside. Given the conviction shown by these analysts, let’s take a closer look at both of these stocks.

Here’s what you should know. 1. Unity Software

Unity specializes in providing a software suite that allows users to produce real-time, interactive 3D content, the kind of immersive content that instantly responds to user inputs. The company breaks its platform into two segments: Create Solutions and Operate Solutions. The former is a software development engine that allows clients to create and deploy content across more than 20 platforms (e.g. iOS, Android, game consoles). And the latter comprises a suite of tools that help developers engage users and monetize their content through digital advertising and in-app purchases.

The breadth of Unity’s platform has helped it win clients across a range of industries, including architecture, retail, and film. But its easy-to-use development engine has made it the dominant force in the gaming industry. As of the fourth quarter, over 70% of the top 1,000 mobile games were made with Unity, and 3.9 billion monthly active users consumed content created or operated on its platform — that’s about half of the world’s population. Better yet, Unity is also the leading development engine for content for augmented and virtual reality applications, meaning it’s well-positioned to be a key player in the multi-trillion-dollar metaverse.

In 2021, Unity delivered another strong financial performance, especially on the top line. Its customer retention rate ticked up to 140%, meaning the average customer spend 40% more in the past year. In turn, revenue surged 44% to $1.1 billion. And while Unity posted a negative free cash flow of $153 million, the company is investing aggressively in growth, which seems like a smart move given its $45 billion market opportunity.

So could Unity achieve a share price of $150 in the next 12 months? It’s certainly possible, but the macroeconomic uncertainty could cause a pullback in consumer spending and ad budgets, both of which would be a headwind for Unity. For that reason, this growth stock is best viewed as a long-term investment .

Related video: The Triple Threat Facing Tech Stocks (Bloomberg) 2. Redfin

Redfin is a residential real estate brokerage. Its platform connects homebuyers and sellers with agents, and it helps consumers find rental properties. To supplement its core brokerage business, Redfin originates mortgage loans and provides title and settlement services. The company also buys homes directly (i.e. iBuying) and resells them through RedfinNow, giving sellers the benefit of an all-cash offer and a flexible close date.

With a typical brokerage, home sellers pay their agent a fee of 2.5% to 3%. But Redfin treats its agents as employees rather than contractors, allowing the company to charge a lower commission of 1% to 1.5%. Redfin also refunds buyers a portion of their commission. That value proposition has made the company a key player in the residential real estate space. In fact, Redfin is the most visited brokerage site on the web, and the company captured a 1.17% market share in the residential real estate space last year.

Financially, Redfin’s recent results have been somewhat mixed. Average monthly visitors rose 10% to 47 million in 2021, and gross profit jumped 74% to $404 million. That top-line growth was fueled in large part by its $608 million acquisition of rentals marketplace RentPath. However, Redfin’s GAAP loss widened to $1.12 per diluted share, and the company generated a negative free cash flow of $329 million.

Looking ahead, Redfin benefits from a strong competitive position in a highly fragmented industry. Its ability to simplify real estate transactions should help the company capitalize on its $112 billion addressable market, a figure that only accounts for its core brokerage and iBuying services. To accelerate its adjacent lending business, Redfin acquired Bay Equity Home Loans for $138 million last month. Moreover, the recent addition of rental listings to its portfolio further expands its market opportunity. That bodes well for the future.

So could Redfin stock […]

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